Components of Time Series

The values of a time series may be affected by the number of movements or fluctuations, which are its characteristics. The types of movements characterizing a time series are called components of time series or elements of a time series. These are four types

Secular Trend  Seasonal Variations  Cyclical Variations  Irregular Variations 

Secular Trend 

Secular Trend is also called long term trend or simply trend. The secular trend refers to the general tendency of data to grow or decline over a long period of time. For example the population of India over years shows a definite rising tendency. The death rate in the country after independence shows a falling tendency because of advancement of literacy and medical facilities. Here long period of time does not mean as several years. Whether a particular period can be regarded as long period or not in the study of secular trend depends upon the nature of data. For example if we are studying the figures of sales of cloth store for 1996- 1997 and we find that in 1997 the sales have gone up, this increase cannot be called as secular trend because it is too short period of time to conclude that the sales are showing the increasing tendency. On the other hand, if we put strong germicide into a bacterial culture, and count the number of organisms still alive after each 10 seconds for 5 minutes, those 30 observations showing a general pattern would be called secular movement. 

Mathematically the secular trend may be classified into two types 

1. Linear Trend

 2. Curvi -Linear Trend or Non-Linear Trend

If one plots the trend values for the time series on a graph paper and if it gives a straight line then it is called a linear trend i.e. in linear trend the rate of change is constant where as in non-linear trend there is varying rate of change.

Seasonal Variations 

Seasonal variations occur in the time series due to the rhythmic forces which occurs in a regular and a periodic manner with in a period of less than one year. Seasonal variations occur during a period of one year and have the same pattern year after year. Here the period of time may be monthly, weekly or hourly. But if the figure is given in yearly terms then seasonal fluctuations does not exist. 

There occur seasonal fluctuations in a time series due to two factors. 

 Due to natural forces 

 Manmade convention. 

 The most important factor causing seasonal variations is the climate changes in the climate and weather conditions such as rain fall, humidity, heat etc. act on different products and industries differently. 

For example during winter there is greater demand for woolen clothes, hot drinks etc. Where as in summer cotton clothes, cold drinks have a greater sale and in rainy season umbrellas and rain coats have greater demand.

Though nature is primarily responsible for seasonal variation in time series, customs, traditions and habits also have their impact. For example on occasions like dipawali, dusserah, Christmas etc. there is a big demand for sweets and clothes etc., there is a large demand for books and stationary in the first few months of the opening of schools and colleges.

 Cyclical Variations or Oscillatory Variation 

This is a short term variation occurs for a period of more than one year. The rhythmic movements in a time series with a period of oscillation( repeated again and again in same manner) more than one year is called a cyclical variation and the period is called a cycle. The time series related to business and economics show some kind of cyclical variations. One of the best examples for cyclical variations is 'Business Cycle'. 

In this cycle there are four well defined periods or phases. 

 Boom  Decline  Depression  Improvement

Irregular Variation 

It is also called Erratic, Accidental or Random Variations. The three variations trend, seasonal and cyclical variations are called as regular variations, but almost all the time series including the regular variation contain another variation called as random variation. This type of fluctuations occurs in random way or irregular ways which are unforeseen, unpredictable and due to some irregular circumstances which are beyond the control of human being such 7 as earth quakes, wars, floods, famines, lockouts, etc. These factors affect the time series in the irregular ways. These irregular variations are not so significant like other fluctuations.